The dragon's gambling den

Macau is only the start: all Asia is coming out to play

LIKE its sister property in Las Vegas but twice as large, the Venetian Macao is built for MICE—meetings, incentives, conventions (or conferences) and exhibitions. It has 3,000 hotel suites, a 15,000-seat arena that has hosted concerts by Lady Gaga and the Police, expensive shops and restaurants and a warren of immense gaming rooms. Next door is the Plaza Macao, featuring yet more gaming, shops and spas, as well as a Four Seasons hotel and the grand residential Plaza Mansions.

Mr Adelson, the owner of the complex, rejects the traditional “hub and spokes” casino-hotel design that forces guests to pass through the gaming floor to do anything outside their hotel room, just in case they feel a sudden urge to chuck some money into a slot machine. His Plaza Macao has a separate entrance to the Mansions and Four Seasons, a long way from the gaming floor. This is for the benefit of Chinese government officials, who may not be photographed in a gambling environment.

Macau is the world's biggest gambling market, and until 2001 it was entirely controlled by one company, Sociedade de Turismo e Diversões de Macau (STDM), headed by Stanley Ho. Mr Ho's garish pair of casinos, the flagship Casino Lisboa and the newer Grand Lisboa, remain the most prominent gambling establishment in central Macau, but he now faces stiff competition from a pair of seasoned Las Vegas companies, Wynn Resorts and Sands China, a subsidiary of Las Vegas Sands, as well as China's Galaxy Entertainment Group.

The contrast between Mr Ho's flagships illustrates the way that Macau's gambling market has evolved. Casino Lisboa is small, tightly packed, loud and smoky. Nearly all of the gaming floor is taken up by tables offering Macau's two most popular games: baccarat—in which punters bet on the turn of a card—and sic bo, in which they bet on the value of three rolled dice. Both involve about as much skill as betting on coin flips. The Grand Lisboa, by contrast, has craps and blackjack tables, a poker room, a sports book, a number of restaurants ranging from the upmarket to an excellent noodle shop, and hundreds of slot machines. However, on a recent visit the sportsbook stood empty and unattended; a single poker table was occupied; blackjack action was scant; four employees stood around a craps table enticing passers-by to try their luck. By contrast baccarat and sic bo were going at full tilt. Old gambling habits die hard.

The competition from Messrs Adelson and Wynn ended Mr Ho's monopoly (though his company still accounts for about one-third of the territory's gambling market) and boosted Macau's overall revenue. Last year the island's 30-odd casinos generated income of around $15 billion. According to GBGC, a consultancy that specialises in the gambling industry, its overall gambling revenue in that year rose by nearly 10%, whereas North America's fell by 7% and Europe's by 12%. And Macau is going from strength to strength: in the first quarter of 2010 its gambling revenues were 57% up on a year earlier.

Mainlanders' playground

The Chinese are known as passionate gamblers, and Macau is where they come to play. Steve Jacobs, the head of Sands China, reckons that four-fifths of his visitors hail from the mainland and the rest mainly from other Asian countries, notably Taiwan, South Korea, Vietnam and India. Most of the Venetian Macao's revenue comes from wealthy guests, many of whom are on junkets organised by businesses in China that market them to visitors, plan the travel and extend credit to gamblers. The casinos provide the gaming and generally split the proceeds with the junket operators.

Chinese visiting rights, however, are tightly controlled by the government. Mainlanders need a visa to go to Macau, and the authorities are apt to change the frequency and duration of permitted visits on a whim. Last year, after a number of embarrassing stories about government officials using public funds to bet in Macau, mainlanders were limited to one visit every three months. Even so, Mr Jacobs said that visa restrictions are “one of the things I think least about”: the Chinese government is clearly happy maintaining Macau as a source of steady gambling revenue, close to but politically separate from the mainland. And with a population of over 1 billion, mainland China has enough people to keep the visitors coming despite the restrictions.

In fact, Macau draws so many punters that casinos are literally rising from the sea: the Venetian and the Plaza anchor a development known as the Cotai Strip, built on a five-kilometre piece of reclaimed land that links the two Macanese islands of Coloane and Taipa. The “Cotai” part of the new plot's name comes from the first syllables of the two islands; the Strip part of it is clearly meant to evoke Las Vegas. Galaxy opened the Grand Waldo, the first resort there, in 2006; the Venetian and Plaza followed soon after and will be joined by two more Sands developments. There will also be new hotels from Raffles, Conrad, Hilton, Sheraton, Swissotel and St Regis.

Busting out all over

The Cotai Strip may be the most high-profile gambling development in Asia, but there are plenty of others. In the past few months Singapore has seen the opening of two large integrated resorts, Resorts World Sentosa and Marina Bay Sands, which cost about $10 billion. The Philippines Amusement and Gaming Corporation (PAGCOR) has launched a hotel-and-casino complex on a large chunk of reclaimed land in Manila Bay. According to PAGCOR, its partners in the venture—Australia's Bloomsbury Investments, Malaysia's Genting Group and Aruze, a Japanese company known mainly for its pachinko and slot machines—each stand ready to invest $2 billion-3 billion in the venture.

In 2008 the government of Vietnam granted Asian Coast Development, a Canadian company, the right to construct five integrated resorts on 169 hectares of beachfront land near Ho Chi Minh City. The first of them, the MGM Grand Ho Tram, is scheduled to open in 2013. In Bavet, Cambodia, south-east of Phnom Penh, the $100m Titan King Casino opened in February this year. It joins a number of other Cambodian casinos near the country's borders with Vietnam and Thailand. In Japan the only legal forms of gambling at the moment are pachinko, the lottery and horseracing, but that could soon change. Mr Jacobs predicts that if the Japanese market were to open up, it would be five to ten times the size of Macau's.

Yet many Asian governments, for all their eagerness to get their hands on more tax revenue, still remain ambivalent about gambling. Singapore charges its own citizens S$100 ($72) to enter its casinos but foreigners pay nothing. Only one of South Korea's 14 casinos is open to the locals. Egyptian and North Korean casinos too will happily take foreigners' money yet bar their own citizens. China rations mainlanders' access to Macau. On the Chinese mainland the only legal form of gambling is a thriving lottery.